Thursday, September 13, 2012

Ben's QE-4Ever: Job Creation (and Money, of course) for Wall Street, Happy, Bubbly Feeling for the Rest

So, this is a Harvard- and MIT-trained economist, declaring his QE-for-a-foreseeable-future is to make people feel happy from rising asset price (stock market and housing price) so that they are inclined to spend more, and to create jobs for Wall Street.

From the press conference Q&A, between Ben Bernanke and Reuters' Pedro da Costa, as related by Zero Hedge (9/13/2012):

"It explains, beyond a reasonable doubt, that the only goal the Fed now has is to reflate the stock market bubble to previously unseen levels, to focus on generating jobs although not for everyone but only for Wall Street, consequences be damned, because by the time the consequences arrive, and they will (just recall that subprime is contained) they will be some other Fed chairman's problem. ..."

From the official transcript:

QUESTION: My question is -- I want to go back to the  transmission mechanism, because speaking to people on the sidelines of the Jackson Hole conference, that seemed to be the concern about the remarks that you made, is that they could clearly see the effect on rates and they could see the effect on the stock market, but they couldn't see how that had helped the economy.

So I think there's a fear that over time this has been a policy that's helping Wall Street, but not doing that much for Main Street. So could you describe in some detail, how does it really different -- differ from trickle-down economics, where you just pump money into the banks and hope that they lend?

BERNANKE: Well, we are -- this is a Main Street policy, because what we're about here is trying to get jobs going. We're trying to create more employment. We're trying to meet our maximum employment mandate, so that's the objective. Our tools involve -- I mean, the tools we have involve affecting financial asset prices, and that's -- those are the tools of monetary policy.

There are a number of different channels -- mortgage rates, I mentioned other interest rates, corporate bond rates, but also the prices of various assets, like, for example, the prices of homes. To the extent that home prices begin to rise, consumers will feel wealthier, they'll feel more -- more disposed to spend. If house prices are rising, people may be more willing to buy homes because they think that they'll, you know, make a better return on that purchase. So house prices is one vehicle.

Stock prices -- many people own stocks directly or indirectly. The issue here is whether or not improving asset prices generally will make people more willing to spend.

One of the main concerns that firms have is there's not enough demand. There are not enough people coming and demanding their products. And if people feel that their financial situation is better because their 401(k) looks better or for whatever reason -- their house is worth more -- they're more willing to go out and spend, and that's going to provide the demand that firms need in order to be willing  to hire and to invest.


Anonymous said...

America is become more and more Japanese. The Japanese are leading our economic policy!

Of course Romney statements about firing Ben sealed the QE3 deal. No way Ben is going to let Romney have a chance of winning come November. All this funny money lends O'Bama a boost come November. Not that it really would matter, I have no Doubt that Romney would adopt O'Bama strategy if elected.

Perhaps if the GOP retains control of Congress, the collapse of the Union can be postpone a wee-bit longer.

Anonymous said...

How is the collapse of the USA going to be delayed by a return to power of the same Republicans that created the bubble that burst in 2008? Could you explain?

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Anonymous said...

@Anon 4:43PM
You're right that it doesn't matter whether it's "Obama" vs "Romney". It doesn't make any difference. All of that is for show, just like professional wrestling. It's drama to entertain people.

But "America is becoming Japanese"?
If I'm not mistaken, the Japanese adopted many American systems after the Americans unnecessarily nuked their citizens with weapons of mass destruction - something that, despite recent fears of "terrorism", no other country has ever done in the history of mankind.

And no, the argument that the nukes were necessary to stop Japan is absolute rubbish. I've heard that Japan was ready to surrender, but even if that wasn't true, there was NEVER any "need" to NUKE CIVILIANS.

There's no excuse for that kind of action. It's like saying it's okay for someone to massacre all your friends and family, and all THEIR friends and family, AND all THEIR friends and family, etc... just because you threatened them.

I'm sure they had many other options. They just used the war as an excuse to test their weapons on other humans, and people blindly believe that because they don't want to admit that their own country or allies are responsible for unnecessary mass murder and destruction on an unprecedented scale.

To be clear, I'm not trying to make Americans feel bad for what happened. It's not like they were the ones who made the decision. As far as I'm concerned, that applies to everyone else whose country or race or gender committed atrocities.

I know I don't like being associated or saddled with any expectations based solely on my physical body. I didn't choose the body I was born with, so I don't have anything to do with what other people of the same race or country or gender did, or are doing. We're all individuals and we should all be judged as such.

But the people who do justify those atrocities, boasting about them and blindly worshipping their country for them... they should feel bad. They definitely should not feel proud. And they shouldn't keep pointing the finger at everyone else whilst ignoring their own problems.

Sorry for going off-topic again.

Anonymous said...

"How is the collapse of the USA going to be delayed by a return to power of the same Republicans that created the bubble that burst in 2008? Could you explain?"

GridLock! A DNC President and a GOP Congress. Nothing will get passed. If one party controls the Federal Gov't than bad policies will get passed that speed up the collapse. The US needs yin-yang (Chinese Taoism) to hold the balance.

Republicans alone didn't create the RE bubble alone. Democrats had a huge hand in it. Read about the GSEs (Barney Frank, Chris Dodd and Janet Reno), and of course the regulation changes that occured when Clinton was Pres.

"But "America is becoming Japanese"? If I'm not mistaken, the Japanese adopted many American systems..."

QE! Japan was a progressive when it used QE in the late 1980s to bailout is banking problems. Nothing got fixed and caused what would have been a three year very bad recession into a 25+ year recession. The US is now following this policy nearly to the letter that Japan did. The US is morphing into a single party political system, where the differences between the GOP and the DNC no longer matter. Both US parties are driving the nations economy over the cliff. Both have widespead cronism which is also a problem in Japan. Japan has been effectively ruled by the same party for what 60 years now? The US is quickly running up its national debt, and is closing in on Japan's Debt to GDP ratio. The US Fed is printing money and using it indirectly (via curreny swaps) to prop up the EU, similar to Japan's BOJ to sell Yen and Buy US dollars (although to support its export economy).

Anonymous said...

i don't care how much money you print!
just don't bring it to my country!
maybe we need to levy some kind of import tax
on "dollar bills"? i think free trade agreement doesn't cover the commodity called "dollar bills"...

Anonymous said...

MIT creaTED study out of thin air, no one will die as a result of Fukushima

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